Twice in six months, Rupert Murdoch has rocked the TV world - both times at the expense of CBS.
But $ 2.1 billion later, Murdoch's 8-year-old Fox network is still fourth in a four-horse race. And CBS, though seriously staggered, is still No. 1.
TV and advertising executives were still shaking their heads Tuesday, marveling at Murdoch's audacity. He shocked the industry Monday by announcing plans to invest $ 500 million in New World Communications Group, which owns a group of TV stations that will switch affiliations from ABC, NBC and CBS to Fox.
Murdoch's News Corp. gets a 20% stake in New World. But more important, the Fox network will be able to move its programs from weaker, lower-rated UHF channels to stronger-signaled VHF channels in key markets such as Dallas, Detroit and Atlanta.
Eight of the 12 stations switching to Fox are CBS affiliates. Three are ABC affiliates; one is an NBC affiliate. CBS also took a hit last December, when it lost the rights to televise the NFL's National Football Conference games to Fox.
Along with the NFL telecasts, Fox's new affiliate stations are bound to give the fourth network a ratings boost. Some industry executives say Fox could get an across-the-board boost of 5% - far less than the 40% Murdoch predicts. But any ratings increase will add to Fox's legitimacy and enable it to bring in more advertising revenue.
CBS' ratings are sure to suffer from the loss of football. They could dip even more if CBS is forced to replace its defecting affiliates with weaker UHF stations, which are positioned above 13 on the dial.
Wall Street was still feeling tremors Tuesday: CBS shares, which fell $ 15.50 to $ 288 Monday, skidded further Tuesday. They closed at $ 270, down 18. Cap Cities/ABC shares also suffered, falling to $ 735 1/2, down 17 3/4. Shares of NBC parent, General Electric, rose 1/2 to $ 47 1/2.
Fox parent News Corp.'s American depositary receipts closed up $ 2 at $ 54 7/8. New World Communications, up 2 1/8 to $ 12 3/4.
But looking past Tuesday's move:
-- Fox has a long way to go before it's in the same league as CBS.
Fox supplies its affiliates with only 15 hours of programs a week, all in prime time. The so-called Big Three each program more than 50 hours a week, 22 in prime time.
Fox has no national newscast, no daytime soap opera, no late-night talk show. It continues to struggle with its prime time-only lineup. This fall, it will juggle programs on six of seven nights. Once-solid shows such as Roc and In Living Color are being canceled. Others such as Married . . . With Children have been losing their ratings muscle.
"It's terrific to have better position on the dial and a station that's more powerful to carry your programming. But what are they going to put on? They have a number of good shows that are starting to wear out," says media buyer Paul Schulman.
One group bound to be watching is federal regulators: The Federal Communications Commission may take an increasing interest in Murdoch and Fox. FCC rules prohibit ownership of more than 12 TV stations by any individual or company. Some suggest News Corp. - which owns eight stations - may be breaking that rule with its 20% stake in New World, even though News Corp. is to be a non-voting shareholder.
In addition, the FCC may look at attempts by the Murdoch family to buy TV stations; at News Corp.'s efforts to buy non-voting stakes in other station groups; and at whether the Australian-born Murdoch was a U.S. citizen, as required by law, when Fox began buying stations.
Murdoch could face regulatory delays and court challenges. As it is, the Dallas, St. Louis, Austin, Texas, and Birmingham, Ala., stations won't join the Fox fold until late 1995.
As a group, Fox affiliates have to feel they are part of a stronger network as a result of Murdoch's moves. But more than a few are troubled by his willingness to jettison loyal affiliates, such as WOIO in Cleveland.
WOIO owner Milton Maltz, a longtime Murdoch admirer, made his station one of the original Fox affiliates and personally introduced Murdoch to Art Modell, owner of the Cleveland Browns and then-head of the NFL's TV committee.
"I wouldn't say I was betrayed. I was very disappointed," Maltz says. "In business, we're all out to win. The question is at what cost."
-- CBS must scramble to find affiliates in New World markets.
Fox and CBS have set very different targets for themselves. Fox aims its shows at hip, young, urbanites while CBS plays to an older audience of suburban baby boomers. At any Fox stations signed by CBS, it's going to be "like taking the MTV crowd and putting them on PBS," says Robert Turner of syndicator Multimedia Entertainment.
The network insists it won't merely sign up Fox affiliates that were jilted Monday. That suggests it may go after VHF stations now affiliated with ABC and NBC. "I don't want to start a bidding war," says Anthony Malara, president of affiliate relations at CBS. "But I don't want anybody to assume we're prepared to simply walk across the street" to the old Fox stations.
Adds NBC President Bob Wright, "No company will chase NBC out of any landscape."
Still, station owners are licking their chops. "Every (TV station) general manager is running a model today as to what his profitability will be under each network," says Jess Epstein, chief financial officer of syndication power King World.
The CBS defectors reach 10.5% of U.S. households. CBS says it will be hurt deepest in Dallas and Phoenix, where its affiliates were strongest.
David Poltrack, CBS' research guru, says the network can expect an initial ratings decline of 15% in markets where it is forced to move its affiliation to a UHF station. But nationwide, the network should face a maximum ratings loss of only 1% to 2%, which will be "economically irrelevant," he insists.
Some CBS shows actually may pick up a few viewers. Several CBS stations joining Fox have refused to air CBS This Morning; some air the top-rated Late Show with David Letterman later than normal.
One exception: CBS Evening News with Dan Rather and Connie Chung. CBS almost certainly will have to make changes in its news division, where staffers were particularly flabbergasted by the Fox move. CBS Evening News has fallen to No. 3 in recent months.
CBS can count on further ratings erosion in news if it is forced to replace any lost affiliates with Fox stations or independents. Few of those stations have the established local newscasts that could provide solid lead-ins to CBS Evening News.
In the end, it may be New World, rather than Murdoch, that was foxiest. The company, controlled by Revlon CEO Ronald Perelman, hopes to use the seven stations it now owns and eight others it is buying to become a power in programming.
For New World, less was more. The relatively small amount of programming its stations will get from Fox gives them more time to air shows created by New World's production arm. New World will get to keep 100% of the ad revenue generated by its own programming. And after building a following for its own shows, it can sell to other stations in the lucrative syndication market.
Big Three affiliates are obligated to air too much network programming to try anything similar. Paramount and Time Warner, both of which are launching networks with just a few hours of programming, may be able to lure affiliates if owners of other station groups are tempted to try the New World route.
Out-Foxing its rivals
The deal to switch 12 major-market TV affiliates to News Corp's Fox network could position the scrappy upstart to tke on the Big 3: CBS, NBC, ABC.
